UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 8, 2019
KUSHCO
HOLDINGS, INC.
(Exact name of registrant as specified in
its charter)
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Nevada
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000-55418
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46-5268202
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(State or other jurisdiction
of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.)
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11958 Monarch Street, Garden Grove, CA
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92841
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(Address of principal executive offices)
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(Zip Code)
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Registrant's telephone number, including
area code:
(714) 243-4311
(Former name or former address, if changed
since last report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Indicate by check mark whether the registrant is an emerging
growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
x
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act.
x
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Item 4.02
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Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
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On April 8, 2019, the Audit Committee of
the Board of Directors (the “Audit Committee”) of KushCo Holdings, Inc. (the “Company”), after discussion
with management of the Company and the Company’s independent registered public accounting firm, RBSM LLP (“RBSM”),
concluded that the Company’s previously issued audited consolidated financial statements as of and for the fiscal years ended
August 31, 2018 and 2017 included in the Company’s Annual Reports on Form 10-K for such periods and unaudited condensed consolidated
interim financial statements as of and for the fiscal periods ended May 31, 2017, November 30, 2017, February 28, 2018, May 31,
2018 and November 30, 2018 included in the Company’s Quarterly Reports on Form 10-Q for such periods should no longer be
relied upon. Similarly, management’s reports on the effectiveness of internal controls over financial reporting, earnings
releases, and investor communications describing the financial statements for the periods described above should no longer be relied
upon.
As part of preparing its condensed
consolidated interim financial statements as of and for the fiscal period ended February 28, 2019, the Company identified
inadvertent errors in the accounting for certain shared-settled contingent consideration (“Contingent
Consideration”) relating to the Company’s acquisition of CMP Wellness in May 2017, Summit Innovations in May
2018, and Hybrid Creative in July 2018. In connection with those acquisitions, Contingent Consideration
relating to the respective earnout arrangements were recorded as equity. Upon further evaluation, the Company determined that
the Contingent Consideration should have been accounted for as liabilities with changes in the fair value recorded in the
Company’s consolidated statements of operations.
Based on the foregoing determination, the
Company will correct the material misstatements in the Company’s previously issued consolidated financial statements as of
and for the fiscal years ended August 31, 2018 and 2017 and condensed consolidated interim financial statements as of and for the
fiscal periods ended May 31, 2017, November 30, 2017, February 28, 2018 and May 31, 2018 in a comprehensive amended Annual Report
on Form 10-K for the fiscal year ended August 31, 2018 with expanded financial information and other disclosures in lieu of filing
separate amended annual and quarterly reports for the affected periods during the fiscal years ended August 31, 2018 and 2017,
and to correct the material misstatements in the Company’s previously-issued condensed consolidated interim financial statements
as of and for the fiscal period ended November 30, 2018 in an amended Quarterly Report on Form 10-Q for such period.
The Company expects the corrected misstatements
to have the following impact on its restated annual consolidated financial statements:
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Increase net loss from $10.2 million to
$24.3 million during its fiscal year ended August 31, 2018;
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Increase net income from $0.1 million
to $1.7 million during its fiscal year ended August 31, 2017;
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No impact on its net revenue or gross
profit for any of the restated fiscal periods; and
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No impact on its cash flows from operations
for any of the restated fiscal periods.
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The Company intends to file such amended
reports as soon as practicable.
Management has concluded that the Company’s
internal control over financial reporting and its disclosure controls and procedures were not effective as of the end of the respective
restatement periods. The Company will amend any disclosures pertaining
to its evaluation of such internal controls and procedures, as appropriate, in connection with the amended 10-K and 10-Q filings.
In February 2019, the Company engaged a national accounting advisory firm to assist with the design and implementation of its internal
controls over financial reporting
based on the criteria established in
Internal
Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The
Audit Committee discussed the matters described in this Item 4.02 with representatives of RBSM.
Forward-Looking
Statements
Certain
statements included in this Form 8-K are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include statements regarding the effects of the restatement of the Company’s
past financial statements and the expected timing of filing of the Company’s amended periodic reports. Forward-looking statements
may involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or
achievements of the Company to be materially different from historical results or from any future results or projections
expressed or implied by such forward-looking statements. Accordingly, readers should not place undue reliance on any
forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are
urged to consider statements in the conditional or future tenses or that include terms such as “believes,”
“belief,” “expects,” “estimates,” “intends,” “anticipates” or
“plans” to be uncertain and forward-looking.
Factors that may cause actual results to differ materially
from current expectations include, among other things, those listed under Part I, Item 1A. “Risk Factors” in
our Annual Report on Form 10-K for the fiscal year ended August 31, 2018 and the Company’s other filings with the SEC. Except as required by law, the Company
assumes no obligation to update or revise these forward-looking statements for any reason, even if new information
becomes available in the future.
On April 9, 2019, the Company issued a press release announcing
that it will restate certain previously issued financial statements as described in Item 4.02 herein. The press release is attached
as Exhibit 99.1 hereto.
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Item 9.01.
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Financial Statements
and Exhibits.
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(d) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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KUSHCO HOLDINGS, INC.
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(Registrant)
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April 9, 2019
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/s/ Nicholas Kovacevich
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(Date)
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Nicholas Kovacevich
Chairman and Chief Executive Officer
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INDEX TO EXHIBITS
Exhibit 99.1
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KushCo Holdings to Report Second Fiscal Quarter 2019 Earnings
on Thursday, April 11, 2019
KushCo Announces Decision to Restate
Prior Period Financial Statements for Fiscal Years 2018 and
2017 for Non-Cash Items Related to Acquisitions of CMP Wellness, Summit
Innovations and Hybrid Creative
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GARDEN
GROVE, Calif., April 9, 2019 – KushCo Holdings, Inc. (OTCQB: KSHB) (“KushCo” or the “Company”) today
announced
it will issue its fiscal second quarter 2019 results press release on April 11, 2019 after U.S. markets close.
The Company will
also host a conference call on Thursday, April 11, 2019 at 4:30 PM Eastern Time.
Participant
Dial-In Numbers:
Toll-Free: 1-877-407-9039
Toll / International:
1-201-689-8470
*Participants
should request the KushCo Holdings Earnings Call or
provide confirmation
code 13688958
The call will be webcast, with an accompanying
slide deck, on the
KushCo
Events page of the Company website at
www.kushco.com
.
Please visit the website at least 15 minutes prior to the call to register, download, and install any necessary audio software.
A replay of the call will be available on the
KushCo
Events page approximately two
hours after the conference call has ended.
Nick Kovacevich,
Chief Executive Officer of
KushCo
, and Chris Tedford, Chief Financial Officer, will
be conducting a question and answer session following their prepared remarks.
Decision to
Restate Prior Period Financial Statements for Fiscal 2018 and 2017
The Company identified inadvertent
errors in the accounting for certain shared-settled contingent consideration (“Contingent Consideration”) relating
to its acquisition of CMP Wellness in May 2017, Summit Innovations in May 2018, and Hybrid Creative in July 2018. In connection with those acquisitions, Contingent Consideration relating to the respective earnout
arrangements were recorded as equity. Upon further evaluation, the Company determined that the Contingent Consideration should
have been accounted for as liabilities with changes in the fair value recorded in the Company’s consolidated statements of
operations.
The Company expects the corrected misstatements
to have the following impact on its restated annual consolidated financial statements:
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Increase
net loss from $10.2 million to $24.3 million during its fiscal year ended August 31, 2018;
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Increase
net income from $0.1 million to $1.7 million during its fiscal year ended August 31, 2017;
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No
impact on its net revenue or gross profit for any of the restated fiscal periods; and
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No
impact on its cash flows from operations for any of the restated fiscal periods.
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The Company intends to file such amended
reports as soon as practicable.
Management has concluded that the Company’s
internal control over financial reporting and its disclosure controls and procedures were not effective as of the end of the respective
restatement periods. The Company will amend its disclosures pertaining to the evaluation of such internal controls and procedures,
as appropriate, in connection with the amended 10-K and 10-Q filings. In February 2019, the Company engaged a national accounting
advisory firm to assist with the design and implementation of its internal controls over financial reporting based on the criteria
established in
Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
To
be added to the distribution
list, please
email ir@kushco.com
with “Kush”
in the subject line.
About KushCo Holdings, Inc.
KushCo Holdings, Inc. (OTCQB: KSHB) (
www.kushco.com
)
is the premier producer of ancillary products and services to the cannabis and hemp industries. KushCo Holdings’ subsidiaries
and brands provide, product quality, exceptional customer service, compliance knowledge and a local presence in serving its diverse
customer base.
Founded in 2010, KushCo Holdings has now
sold more than 1 billion units to growers, processors and producers across North America, South America, and Europe.
The Company has been featured in media
nationwide, including CNBC, Los Angeles Times, TheStreet.com, Entrepreneur, and business magazine Inc. While KushCo Holdings
provides products and solutions to customers in the cannabis and CBD industries, it has no direct involvement with the cannabis
plant or any products that contain THC or CBD.
For more information, visit
www.kushco.com
or call (888)-920-5874
Forward-Looking Statements
This press release may include predictions,
estimates or other information that might be considered forward-looking within the meaning of applicable securities laws. While
these forward-looking statements represent the Company’s current judgments, they are subject to risks and uncertainties
that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements,
which reflect the opinions of the Company’s management only as of the date of this release. Please keep in mind that the
Company is not obligating itself to revise or publicly release the results of any revision to these forward-looking statements
in light of new information or future events. When used herein, words such as: “potential,” “look forward,”
“expect,” “believe,” “dedicated,” “building,” or variations of such words and
similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially
from those contemplated in any forward-looking statements made by the Company herein are often discussed in filings the Company
makes with the United States Securities and Exchange Commission (SEC), available at:
www.sec.gov
,
and on the Company’s website, at:
www.kushco.com
.
KushCo Holdings Contacts
Media Contact:
Anne Donohoe / Nick Opich
KCSA Strategic Communications
212-896-1265 / 212-896-1206
adonohoe@kcsa.com
/
nopich@kcsa.com
Investor Contact:
Phil Carlson / Elizabeth Barker
KCSA Strategic Communications
212-896-1233 / 212-896-1203
ir@kushco.com